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Economic Incentives and Foster Care Placement

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  • Brian Duncan
  • Laura Argys

Abstract

Using micro‐level data on children entering foster care in 1998, we estimate how the financial compensation paid to foster caregivers affects the placement of foster children. Controlling for observable child and county characteristics as well as for unobservable state effects, our estimates indicate that a $100 increase in the basic monthly foster care payment reduces the number of children placed in group homes by 28.7%, with more children instead going to nonrelative foster homes. Further estimates indicate that the children moved out of group homes are equally likely to be placed in two‐parent and single‐parent homes, but they are disproportionately placed with caregivers who do not share the child's race or ethnicity. Finally, a $100 increase in foster care payment will decrease the number of times the average child is moved from one foster placement to another by 20%.

Suggested Citation

  • Brian Duncan & Laura Argys, 2007. "Economic Incentives and Foster Care Placement," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 114-142, July.
    • Handle: RePEc:wly:soecon:v:74:y:2007:i:1:p:114-142
    DOI: 10.1002/j.2325-8012.2007.tb00830.x
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    References listed on IDEAS

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    1. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
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    Cited by:

    1. Marinescu, Ioana & Tan, Fei & Greeson, Johanna K.P., 2023. "Economic conditions and the number of children in foster care," Children and Youth Services Review, Elsevier, vol. 144(C).
    2. Bishop Kelly C. & Mac Donald Diana E., 2022. "The Effect of Paying Parents to Adopt: Evidence from Minnesota's Foster-Care System," Working Papers 2022-01, Banco de México.
    3. Cameron Taylor, 2024. "Why do families foster children? A Beckerian approach," Review of Economics of the Household, Springer, vol. 22(1), pages 261-293, March.

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